Question 1

An inferior good is distinguished by a

Accepted Answer

A) negative price elasticity of demand. 
B) positive price elasticity of demand. 
C) positive income elasticity of demand. 
D) negative income elasticity of demand. 
A) negative price elasticity of demand. 
B) positive price elasticity of demand. 
C) positive income elasticity of demand. 
D) negative income elasticity of demand.

Question 2

Since the income elasticity for food is estimated to be 0.51,it appears that the proportion of income spent by poor people on food is ____ the proportion spent by those with higher incomes.

Accepted Answer

A) greater than 
B) less than 
C) about the same as 
D) about half as great as 
A) greater than 
B) less than 
C) about the same as 
D) about half as great as

Question 3

Sarah recently got a 10 percent raise.She now purchases 30 percent more in groceries on a weekly basis.Sarah's income elasticity for groceries is

Accepted Answer

A) 0.33. 
B) 0.5. 
C) 1. 
D) 3. 
A) 0.33. 
B) 0.5. 
C) 1. 
D) 3.

Question 4

Figure 7-5
  
-Which of the following is true for the demand curve depicted in Figure 7-5?

Accepted Answer

A) In the $3 to $4 range,the price elasticity of the demand curve equals 1. 
B) At a price of $3,the price elasticity of the demand curve equals approximately -3.3. 
C) In the $3 to $4 range,the demand curve is inelastic. 
D) In the $3 to $4 range,the demand curve is elastic. 
A) In the $3 to $4 range,the price elasticity of the demand curve equals 1. 
B) At a price of $3,the price elasticity of the demand curve equals approximately -3.3. 
C) In the $3 to $4 range,the demand curve is inelastic. 
D) In the $3 to $4 range,the demand curve is elastic.

Question 5

Marginal utility is the change in

Accepted Answer

A) total utility when an extra unit of output is produced. 
B) total utility when an extra unit of output is consumed. 
C) marginal utility when an extra unit of output is produced. 
D) average utility when an extra unit of output is consumed. 
A) total utility when an extra unit of output is produced. 
B) total utility when an extra unit of output is consumed. 
C) marginal utility when an extra unit of output is produced. 
D) average utility when an extra unit of output is consumed.

Question 6

Studies indicate that the demand for fresh tomatoes is much more elastic than the demand for salt.These findings reflect that

Accepted Answer

A) tomatoes are a necessity while salt is a luxury. 
B) it takes longer for consumers to adjust to a change in the price of salt than to a change in the price of tomatoes. 
C) salt will not spoil as easily as fresh tomatoes. 
D) more good substitutes exist for fresh tomatoes than for salt. 
A) tomatoes are a necessity while salt is a luxury. 
B) it takes longer for consumers to adjust to a change in the price of salt than to a change in the price of tomatoes. 
C) salt will not spoil as easily as fresh tomatoes. 
D) more good substitutes exist for fresh tomatoes than for salt.

Question 7

Table 7-1
  
-Refer to Table 7-1.If the price increases from $1.00 to $1.50,

Accepted Answer

A) the market demand decreases by 20 units. 
B) individual demand curves,when drawn,will shift to the left. 
C) the quantity demanded in the market decreases by 2 units. 
D) the quantity demanded in the market decreases by 7 units. 
A) the market demand decreases by 20 units. 
B) individual demand curves,when drawn,will shift to the left. 
C) the quantity demanded in the market decreases by 2 units. 
D) the quantity demanded in the market decreases by 7 units.

Question 8

John is a well-known consultant who makes $150 an hour and has all the work he can handle.He has a big job in Washington D.C. ,ten hours away.He can drive at a cost of $80 round trip or take a one-hour flight for $300.Which is he likely to do? Are there circumstances that may lead him to choose otherwise?

Accepted Answer

From an opportunity cost perspective,we

Question 9

If the price of a good is $0,a consumer will

Accepted Answer

A) consume an infinite quantity. 
B) consume all units with positive marginal utility. 
C) consume the entire amount supplied. 
D) consume until total utility becomes 0. 
A) consume an infinite quantity. 
B) consume all units with positive marginal utility. 
C) consume the entire amount supplied. 
D) consume until total utility becomes 0.

Question 10

Which of the following most directly reflects the law of diminishing marginal utility?

Accepted Answer

A) After watching two football games,Terry decides to watch a third game. 
B) A sports fan enjoys watching Monday night football rather than going to the theater. 
C) After listening to three compact discs,Kim decides to go bowling rather than listen to a fourth disc. 
D) A musician receives the biggest ovation of the evening after playing the final number of a recital. 
A) After watching two football games,Terry decides to watch a third game. 
B) A sports fan enjoys watching Monday night football rather than going to the theater. 
C) After listening to three compact discs,Kim decides to go bowling rather than listen to a fourth disc. 
D) A musician receives the biggest ovation of the evening after playing the final number of a recital.

Question 11

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent.Assuming other factors are held constant,CDs would be classified as

Accepted Answer

A) inferior goods. 
B) normal goods. 
C) elastic goods. 
D) inelastic goods. 
A) inferior goods. 
B) normal goods. 
C) elastic goods. 
D) inelastic goods.

Question 12

If the quantity of oranges purchased decreases by 30 percent as the result of a 15 percent increase in the price of oranges,the price elasticity of demand for oranges is

Accepted Answer

A) -0.25. 
B) -0.50. 
C) -1.25. 
D) -2. 
A) -0.25. 
B) -0.50. 
C) -1.25. 
D) -2.

Question 13

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that

Accepted Answer

A) gasoline is an economic good but water is not. 
B) the marginal utility of gasoline is greater than the marginal utility of a gallon of water. 
C) the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. 
D) the total utility of gasoline exceeds the total utility of water. 
A) gasoline is an economic good but water is not. 
B) the marginal utility of gasoline is greater than the marginal utility of a gallon of water. 
C) the average utility of a gallon of gasoline is greater than the average utility of a gallon of water. 
D) the total utility of gasoline exceeds the total utility of water.

Question 14

If bus travel is an inferior good,then its income elasticity of demand will be

Accepted Answer

A) strictly greater than one. 
B) positive. 
C) equal to zero. 
D) negative. 
A) strictly greater than one. 
B) positive. 
C) equal to zero. 
D) negative.

Question 15

If a demand curve for a good were completely vertical,it would be considered

Accepted Answer

A) perfectly elastic. 
B) perfectly inelastic. 
C) of unitary elasticity. 
D) relatively inelastic. 
A) perfectly elastic. 
B) perfectly inelastic. 
C) of unitary elasticity. 
D) relatively inelastic.

Question 16

Figure 7-11
  
-Refer to Figure 7-11.As price falls from PA to PB,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?

Accepted Answer

A) D₁ 
B) D₂ 
C) D₃ 
D) All of the above are equally elastic. 
A) D₁ 
B) D₂ 
C) D₃ 
D) All of the above are equally elastic.

Question 17

Figure 7-13
  
-Refer to Figure 7-13.If price increases from $10 to $15,total revenue will

Accepted Answer

A) increase by $20,so demand must be inelastic in this price range. 
B) increase by $5,so demand must be inelastic in this price range. 
C) decrease by $20,so demand must be elastic in this price range. 
D) decrease by $10,so demand must be elastic in this price range. 
A) increase by $20,so demand must be inelastic in this price range. 
B) increase by $5,so demand must be inelastic in this price range. 
C) decrease by $20,so demand must be elastic in this price range. 
D) decrease by $10,so demand must be elastic in this price range.

Question 18

An inferior good is a good whose quantity demanded

Accepted Answer

A) rises when its price falls. 
B) falls when the price of a related good falls. 
C) falls when the consumer's total utility rises. 
D) rises when the consumer's income falls. 
A) rises when its price falls. 
B) falls when the price of a related good falls. 
C) falls when the consumer's total utility rises. 
D) rises when the consumer's income falls.

Question 19

Diminishing marginal utility means that

Accepted Answer

A) as you consume more of a good,other things constant,the total satisfaction you obtain from consuming this good tends to fall. 
B) as you hire more labor,other things constant,the total amount produced begins to fall. 
C) as you consume more of a good,other things constant,the additional satisfaction you obtain from each additional unit of the good tends to fall. 
D) as you consume more of a good,other things constant,the extra satisfaction you obtain from each additional unit becomes negative. 
A) as you consume more of a good,other things constant,the total satisfaction you obtain from consuming this good tends to fall. 
B) as you hire more labor,other things constant,the total amount produced begins to fall. 
C) as you consume more of a good,other things constant,the additional satisfaction you obtain from each additional unit of the good tends to fall. 
D) as you consume more of a good,other things constant,the extra satisfaction you obtain from each additional unit becomes negative.

Question 20

If Joe's income increased and as a result he purchased more wine and less fast food,

Accepted Answer

A) wine is a normal good and fast food an inferior good for Joe. 
B) wine is an inferior good and fast food a normal good for Joe. 
C) both wine and fast food are inferior goods for Joe. 
D) both wine and fast food are normal goods for Joe. 
A) wine is a normal good and fast food an inferior good for Joe. 
B) wine is an inferior good and fast food a normal good for Joe. 
C) both wine and fast food are inferior goods for Joe. 
D) both wine and fast food are normal goods for Joe.

Exam 20: Consumer Choice and Elasticity

An inferior good is distinguished by a

Since the income elasticity for food is estimated to be 0.51,it appears that the proportion of income spent by poor people on food is ____ the proportion spent by those with higher incomes.

Sarah recently got a 10 percent raise.She now purchases 30 percent more in groceries on a weekly basis.Sarah's income elasticity for groceries is

Figure 7-5 -Which of the following is true for the demand curve depicted in Figure 7-5?

Marginal utility is the change in

Studies indicate that the demand for fresh tomatoes is much more elastic than the demand for salt.These findings reflect that

Table 7-1 -Refer to Table 7-1.If the price increases from $1.00 to $1.50,

If the price of a good is $0,a consumer will

Which of the following most directly reflects the law of diminishing marginal utility?

The number of CDs purchased increased by 5 percent when consumer income increased by 10 percent.Assuming other factors are held constant,CDs would be classified as

If the quantity of oranges purchased decreases by 30 percent as the result of a 15 percent increase in the price of oranges,the price elasticity of demand for oranges is

The fact that a gallon of gasoline commands a higher market price than a gallon of water indicates that

If bus travel is an inferior good,then its income elasticity of demand will be

If a demand curve for a good were completely vertical,it would be considered

Figure 7-11 -Refer to Figure 7-11.As price falls from PA to PB,we could use the three demand curves to calculate three different values of the price elasticity of demand.Which of the three demand curves would produce the smallest elasticity?

Figure 7-13 -Refer to Figure 7-13.If price increases from $10 to $15,total revenue will

An inferior good is a good whose quantity demanded

Diminishing marginal utility means that

If Joe's income increased and as a result he purchased more wine and less fast food,

The Economic Approach

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Aan Introduction to Basic Macroeconomic Markets

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Modern Macroeconomics and Monetary Policy

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Investment, the Capital Market, and the Wealth of Nations

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Great Debates in Economics: Keynes Versus Hayek

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Lessons From the Great Depression

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Earnings Differences Between Men and Women

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